Using SWOT to Understand Your Company’s Strengths and Weaknesses

One of the most useful tools in the arsenal of business leadership is the strengths, weaknesses, opportunities, and threats (SWOT) analysis. Developed at Stanford University in the 1960s, SWOT is a method of assessing both internal resources (or lack of them) and market conditions. Ideally, a SWOT should be undertaken before any major move, from initiating new product launches to considering internal changes.

A SWOT can help enhance performance on multiple levels because it offers both an optimistic focus on strengths and development of a defense position to avoid good performance being scuttled by weakness. It provides both a singular focus on the organization in strengths and weaknesses, and a wide-ranging view of competitors, the market, and the environment in opportunities and threats. Its depth and flexibility have allowed the SWOT to survive half a century unchallenged as one of business leadership’s most helpful forms of analysis.

A recent Harvard Business Review suggests changes to the classic SWOT, bringing in more of a focus on competitors, market changes, and the environment.

Traditionally, the SW focused on issues internal to the company, and the OT focused on issues external to the company. As the HBR points out, however, the strengths and weaknesses of other organizations are also highly relevant to your own, and potentially profoundly impactful to how initiatives based on SWOT analysis will do when rolled out.

As a result, the article suggests that a category for “Others’ Strengths” and “Others’ Weaknesses” be added to the traditional SWOT matrix. In addition, SWOTs need to focus more on the interplay between both sets of opportunities and weaknesses and the threats and opportunities germane to each.

The new SWOT method might have helped taxis avoid the disruption of ride-hailing services.

Seeing Threats and Opportunities Coming

How will this help business leaders? Well, one of the author’s examples is the taxi industry in 2009. An analysis of strengths would likely have focused on leading market share in major U.S. cities, and a venerable system that had flourished for decades.

However, a focus on other companies’ strengths might have alerted the taxi industry to the potential to connect people wanting rides and people offering them via apps on a smartphone. The system of taxi hailing was inefficient, and depended on physical proximity (and nerve). As long as taxis were the only game in town, taxi companies likely viewed physical hailing as their prime opportunity. In fact, it was a threat.

Once companies like Uber and Lyft presented consumers with a way to connect to a ride that didn’t require stepping out into a street and whistling, they flocked to it. Superseding it was an opportunity for the ride-sharing companies. That, and an advantageous pricing structure disrupted the taxi industry profoundly.

The new SWOT offers precisely what the example encapsulates: a chance to view your strengths and weaknesses in mirror image. Are there new technologies, new markets, or changing circumstances that could make your opportunities actually a threat? Do any of these factors make your threats opportunities? It can be a highly rewarding exercise to perform a new SWOT and find out.